Former computer exec cleared in large insider-trading case

SANTA ANA – A jury cleared the former head of a Santa Ana computer company of insider-trading allegations Friday in what was believed to be the largest-ever such case involving an Orange County business.

The jury in U.S. District Court rejected three civil counts the Securities and Exchange Commission filed against Manouchehr Moshayedi, finding he did not engage in insider trading or make “material misrepresentations or omissions” to investors.

After hearing the verdicts, a smiling Moshayedi hugged his attorneys and gave a thumbs-up to the courtroom gallery. Later, he said he was grateful to the jury.

“I think it says that the justice system works,” Moshayedi, 55, said outside the courtroom.

Moshayedi said the experience had been a “five-year trip.” The SEC began investigating him in 2009 and filed suit in 2012, accusing him of making $134 million by trading stock before bad news about his company became public.

Moshayedi, who lives in Newport Beach, was the founder and chairman of STEC, a maker of computer storage products.

In 2009, EMC had agreed to buy $120 million worth of flash memory drives made by STEC, which sent STEC stock soaring. But EMC bought about $20 million less than predicted in the third quarter of that year and signaled it would not buy as much in 2010.

The SEC said Moshayedi failed to tell investors the bad news in an August 2009 phone call — instead waiting until November, after he and his brother had sold nine million shares of stock.

But Moshayedi’s lawyers said he was as surprised as anyone by the drop in EMC’s business and learned of the problems just before telling investors. STEC had also disclosed to investors that the EMC deals weren’t a sure thing, Moshayedi’s lawyers said.

An EMC executive who sent emails saying the company didn’t want any more STEC products and wouldn’t sign any more big deals later said the messages were simply negotiating tactics.

The SEC could have sought fines of up to $800 million if the jury had found its allegations true. It said Moshayedi’s brother, Mehrdad Mark Moshayedi, made another $134 million off stock trades, but Mehrdad Moshayedi was not a defendant in the case.

An SEC spokesman, John Nester, declined to comment on the specifics of the case.

“We respect the jury’s verdict but will continue to aggressively enforce the law when we believe the evidence supports the allegations,” Nester said in an emailed statement.

After an 11-day trial, the jury deliberated a few hours before reaching the verdicts.

The SEC had sought its equivalent of the “death penalty”: a lifetime ban from serving as an officer or director of a public company. Instead, Moshayedi said he was ready to move “onward and upward to a new venture,” though he didn’t know what.

He is no longer involved with STEC, which he founded in 1990. The company was sold to Western Digital last year.

“Basically, because of this issue, our customers walked away and the firm was sold,” Moshayedi said.

Asked what he planned to do, he said, “I’ve been in the tech business for 24 years, and I’m sure something will pop into my head after I clear all of this out.”